From Financialisation to Innovation in UK Big Pharma

'Governments around the world are rediscovering the importance of industrial policy for productive investments and innovation, especially in sectors that are strategic in dealing with todays' multiple environmental and health crises. Such efforts are however pointless if firms are allowed to financialise and extract value from productive organisations. Through a meticulous historical analysis of two major pharmaceutical companies, this extraordinary book shows the dangers of financialisation and how we can control it. It is a tremendously important and timely book for economists, policy-makers, and citizens looking to promote sustainable prosperity for the many.' Ha-Joon Chang, Professor of Economics, SOAS University of London
'In this impressive book, the authors establish a clear link between the innovation performance of companies and their governance. They do this by looking at the innovation performance of two leading UK pharmaceutical companies, AstraZeneca and GlaxoSmithKline, in the ten years after the mergers in 1999 and 2000 which created them. During the period both companies adopted US-style governance models which linked the reward of executives to increases in the share price of their companies. At the same time executives were allowed to raise the share price of their companies by share buybacks … By establishing such a clear link between the innovation performance of companies and their governance, this book makes an important contribution to the study of how the innovation performance of companies can be improved, and it should be read by both executives and Government policymakers.' Lord David Sainsbury, Chancellor of the University of Cambridge and Former UK Under-Secretary of State for Science and Innovation
'This fascinating book adeptly raises the alarm about how financialisation has impacted and continues to impact innovation and selection of R&D pipelines in the pharmaceutical sector. Tracing the experiences of two of the largest global pharmaceutical companies, the authors unpack how financialization helps firms mete out rewards to senior executives beyond those justified by any value creation metrics. An important contribution to the literature and essential reading for anyone who wants to understand the workings of the sector.' Padmashree Gehl Sampath, Director, Global Access in Action, Harvard University
'The tension between financialization (and the associated incentives for share buybacks and focus on shareholder value alone) and the needs of productive investment and innovation has become a defining feature of contemporary capitalism-nowhere more evident than in the pharma industry. This detailed study of two UK firms shows that different, more socially desirable outcomes are possible: appropriate regulatory and policy regimes can support collective innovation efforts to create value for society rather than just for shareholders. This critically important book is essential reading for anyone concerned with viable corporate governance models that are alternatives to destructive forms of financialized capitalism.' Jayati Ghosh, Professor of Economics, University of Massachusetts Amherst
'What's the true mission of a large pharmaceutical firm today? Are you part of those who doubt about where their key priorities lie? This book is a must-read, enlightening and solid piece of research for anyone who cares about innovation-led economic growth. These distinguished authors gracefully execute a rigorous stepwise demonstration of why brilliant leading pharmaceutical firms in the United Kingdom and the United States of America fail to deliver innovation-led value. The good news is that the book also shows how they can move away from deleterious modes of financialization and engage in value creating organizational learning.' Pascale Lehoux, Professor, Department of Health Management, Evaluation and Policy, Université de Montréal
'The authors give us an exciting, solidly based exploration of the shifting links between financialization and new drug development at two leading British pharmaceutical giants, AstraZeneca and GlaxoSmithKline. As Covid has made clear, we all have a stake in this history.' Louis Galambos, Research Professor, History, Johns Hopkins University